ICAEW BIP · Chapter 6 · Question 6 of 11
Which of the following is a recognised disadvantage of participative (bottom-up) budgeting?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Managers may build budgetary slack into their budgets to make targets easier to achieve
Explanation
Participative budgeting involves managers in setting their own budgets, which uses their local knowledge and tends to improve motivation and acceptance. The drawbacks are that it takes longer and that managers may deliberately overstate costs or understate revenues to create slack. The other options describe drawbacks of imposed (top-down) budgets.
More Budgeting: purposes and approaches MCQs
- Q8What is a fixed budget?
- Q9Which document sets out the instructions, procedures, timetable and responsibilities for preparing the budget?
- Q10A manager compares forecast results for the rest of the year with the budget and takes action now to correct an expected shortfall before…
- Q11In which situation is an imposed (top-down) budget most likely to be appropriate?
- Q1Which of the following is NOT normally a purpose of budgeting?